Treating Customers Fairly within Institutional Firms

February 2007

Treating Customers Fairly (TCF) is an FSA initiative that is aimed at ensuring that firms operate their businesses in a manner that ensures that their customers’ best interests are taken care of. Whilst the initiative has been in a continuous stage of development and consultation over the past two years, the FSA has now indicated that it expects to see evidence of serious action. The FSA has set a deadline of 31st March 2007 for regulated firms to have developed and embedded TCF into their systems and behaviours.

It has often been assumed (wrongly) that TCF applies to retail firms only. (The FSA classifies firms broadly into retail and non-retail firms.) However, many firms carrying out discretionary management services or operating collective investment schemes may also interact directly with retail customers. Additionally whilst it is clear that the implications of TCF will be greater for firms dealing with retail customers, the FSA has made it abundantly clear that TCF applies to all firms.

TCF does not involve following a specific set of rules or regulations and there is no specific definition.

There are however common concepts in relation to TCF that apply whatever the size or nature of the business. These relate to the way in which business is done and are central to the firms’ culture. TCF is something that all firms should strive to ensure is properly embedded into the culture of the whole organisation. Such culture is crucial to ensure that the requirements are properly met. Initially, the TCF initiative was mainly focused on the retail customer. However, in light of the Market in Financial Instruments Directive (MiFID) and the Transparency Directive (TD), TCF is now expected to have greater relevance to the institutional customer.

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